财务管理(英文第十三版)ch13

13-1Chapter13CapitalBudgetingTechniques13-2CapitalBudgetingTechniquesProjectEvaluationandSelectionPotentialDifficultiesCapitalRationingProjectMonitoringPost-CompletionAudit13-3ProjectEvaluation:AlternativeMethodsPaybackPeriod(PBP)InternalRateofReturn(IRR)NetPresentValue(NPV)ProfitabilityIndex(PI)13-4ProposedProjectDataJulieMillerisevaluatinganewprojectforherfirm,BasketWonders(BW).Shehasdeterminedthattheafter-taxcashflowsfortheprojectwillbe$10,000;$12,000;$15,000;$10,000;and$7,000,respectively,foreachoftheYears1through5.Theinitialcashoutlaywillbe$40,000.13-5IndependentProjectIndependent--Aprojectwhoseacceptance(orrejection)doesnotpreventtheacceptanceofotherprojectsunderconsideration.Forthisproject,assumethatitisindependentofanyotherpotentialprojectsthatBasketWondersmayundertake.13-6PaybackPeriod(PBP)PBPistheperiodoftimerequiredforthecumulativeexpectedcashflowsfromaninvestmentprojecttoequaltheinitialcashoutflow.012345-40K10K12K15K10K7K13-7(c)10K22K37K47K54KPaybackSolution(#1)PBP=a+(b-c)/d=3+(40-37)/10=3+(3)/10=3.3Years012345-40K10K12K15K10K7KCumulativeInflows(a)(-b)(d)13-8PaybackSolution(#2)PBP=3+(3K)/10K=3.3YearsNote:Takeabsolutevalueoflastnegativecumulativecashflowvalue.CumulativeCashFlows-40K10K12K15K10K7K012345-40K-30K-18K-3K7K14K13-9PBPAcceptanceCriterionYes!Thefirmwillreceivebacktheinitialcashoutlayinlessthan3.5years.[3.3Years3.5YearMax.]ThemanagementofBasketWondershassetamaximumPBPof3.5yearsforprojectsofthistype.Shouldthisprojectbeaccepted?13-10PBPStrengthsandWeaknessesStrengths:EasytouseandunderstandCanbeusedasameasureofliquidityEasiertoforecastSTthanLTflowsWeaknesses:DoesnotaccountforTVMDoesnotconsidercashflowsbeyondthePBPCutoffperiodissubjective13-11InternalRateofReturn(IRR)IRRisthediscountratethatequatesthepresentvalueofthefuturenetcashflowsfromaninvestmentprojectwiththeproject’sinitialcashoutflow.CF1CF2CFn(1+IRR)1(1+IRR)2(1+IRR)n+...++ICO=13-12$15,000$10,000$7,000IRRSolution$10,000$12,000(1+IRR)1(1+IRR)2Findtheinterestrate(IRR)thatcausesthediscountedcashflowstoequal$40,000.++++$40,000=(1+IRR)3(1+IRR)4(1+IRR)513-13IRRSolution(Try10%)$40,000=$10,000(PVIF10%,1)+$12,000(PVIF10%,2)+$15,000(PVIF10%,3)+$10,000(PVIF10%,4)+$7,000(PVIF10%,5)$40,000=$10,000(.909)+$12,000(.826)+$15,000(.751)+$10,000(.683)+$7,000(.621)$40,000=$9,090+$9,912+$11,265+$6,830+$4,347=$41,444[Rateistoolow!!]13-14IRRSolution(Try15%)$40,000=$10,000(PVIF15%,1)+$12,000(PVIF15%,2)+$15,000(PVIF15%,3)+$10,000(PVIF15%,4)+$7,000(PVIF15%,5)$40,000=$10,000(.870)+$12,000(.756)+$15,000(.658)+$10,000(.572)+$7,000(.497)$40,000=$8,700+$9,072+$9,870+$5,720+$3,479=$36,841[Rateistoohigh!!]13-15.10$41,444.05IRR$40,000$4,603.15$36,841X$1,444.05$4,603IRRSolution(Interpolate)$1,444X=13-16.10$41,444.05IRR$40,000$4,603.15$36,841X$1,444.05$4,603IRRSolution(Interpolate)$1,444X=13-17.10$41,444.05IRR$40,000$4,603.15$36,841($1,444)(0.05)$4,603IRRSolution(Interpolate)$1,444XX=X=.0157IRR=.10+.0157=.1157or11.57%13-18IRRAcceptanceCriterionNo!Thefirmwillreceive11.57%foreachdollarinvestedinthisprojectatacostof13%.[IRRHurdleRate]ThemanagementofBasketWondershasdeterminedthatthehurdlerateis13%forprojectsofthistype.Shouldthisprojectbeaccepted?13-19IRRStrengthsandWeaknessesStrengths:AccountsforTVMConsidersallcashflowsLesssubjectivityWeaknesses:AssumesallcashflowsreinvestedattheIRRDifficultieswithprojectrankingsandMultipleIRRs13-20NetPresentValue(NPV)NPVisthepresentvalueofaninvestmentproject’snetcashflowsminustheproject’sinitialcashoutflow.CF1CF2CFn(1+k)1(1+k)2(1+k)n+...++-ICONPV=13-21BasketWondershasdeterminedthattheappropriatediscountrate(k)forthisprojectis13%.$10,000$7,000NPVSolution$10,000$12,000$15,000(1.13)1(1.13)2(1.13)3+++-$40,000(1.13)4(1.13)5NPV=+13-22NPVSolutionNPV=$10,000(PVIF13%,1)+$12,000(PVIF13%,2)+$15,000(PVIF13%,3)+$10,000(PVIF13%,4)+$7,000(PVIF13%,5)-$40,000NPV=$10,000(.885)+$12,000(.783)+$15,000(.693)+$10,000(.613)+$7,000(.543)-$40,000NPV=$8,850+$9,396+$10,395+$6,130+$3,801-$40,000=-$1,42813-23NPVAcceptanceCriterionNo!TheNPVisnegative.Thismeansthattheprojectisreducingshareholderwealth.[RejectasNPV0]ThemanagementofBasketWondershasdeterminedthattherequiredrateis13%forprojectsofthistype.Shouldthisprojectbeaccepted?13-24NPVStrengthsandWeaknessesStrengths:Cashflowsassumedtobereinvestedatthehurdlerate.AccountsforTVM.Considersallcashflows.Weaknesses:Maynotincludemanagerialoptionsembeddedintheproject.SeeChapter14.13-25NetPresentValueProfileDiscountRate(%)03691215IRRNPV@13%SumofCF’sPlotNPVforeachdiscountrate.NetPresentValue$000s151050-413-26ProfitabilityIndex(PI)PIistheratioofthepresentvalueofaproject’sfuturenetcashflowstotheproject’sinitialcashoutflow.CF1CF2CFn(1+k)1(1+k)2(1+k)n+...++ICOPI=PI=1+[NPV/ICO]OR13-27PIAcceptanceCriterionNo!ThePIislessthan1.00.Thismeansthattheprojectisnotprofitable.[RejectasPI1.00]PI=$38,572/$40,000=.9643(Method#1,13-33)Shouldthisprojectbeaccepted?13-28PIStrengthsandWeaknessesStrengths:SameasNPVAllowscomparisonofdifferentscaleprojectsWeaknesses:SameasNPVProvidesonlyrelativeprofitabilityPotentialRank